• The Grayscale Ethereum Trust (ETHE) is currently experiencing a record 60% discount to its net asset value (NAV).
• The fund’s premium rate has plummeted due to waning institutional interest and a wave of capitulation triggered by the collapse of FTX.
• Grayscale’s Bitcoin Trust (GBTC) has also been trading at record discounts, with the current discount rate standing at 45%.
The Grayscale Ethereum Trust (ETHE) has seen its discount to net asset value (NAV) plunge to a record 60%, the lowest premium rate since its inception. This steep discount reflects waning institutional interest in the fund and a wave of capitulation triggered by the collapse of FTX, the once third-largest cryptocurrency exchange in the world.
The ETHE discount rate had been slowly improving in September with the excitement around the Merge upgrade, however, this trend has since reversed. The discount rate has increased by over 33% in the last month alone, with the fund’s premium rate standing at around 45% on December 1 and spiking to 59.30% by the end of the month.
The lack of a redemption program for any of the Grayscale funds has limited the ability of investors to redeem ETHE for ether. This restriction has resulted in Grayscale trusts trading at a different price to the assets they possess, with investors uncertain around the ability to redeem ETHE for ether anytime soon.
Grayscale’s flagship offering, the Bitcoin Trust (GBTC), has also been trading at record discounts over the past couple of months. The current discount rate for GBTC stands at around 45%, slightly up from the all-time high of around 48%.
The current state of the ETHE and GBTC discounts is not only concerning for investors but raises questions around the future of these funds. It remains to be seen whether or not the discount rates will improve in the future, or if the funds will continue to trade at a considerable discount to their NAV.